Paul Hastings 

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robertspan@paulhastings.com 

May 19,2006 

VIA FACSIMILE AND FEDERAL EXPRESS 

Carlene V. Mcintyre, Esq. 

Chief, Opinions and Appeals Division 

Paul, Hastings, Janafsky & Walker LLP 

515 South Flower Street· 25th Floor· LusAnoeles, GA 90071-2228 

lelephone 213 683 6000 • facsimile 213 627 0705 • I'Nm.paulhastlngs.com 

19978.00005 

The Port Authority of New York and New Jersey 

225 Park Avenue South, 15th Floor 

New York, NY 10003 

Re: EWR Rates and Charges 

Dear Carlene: 

Thank you for your letter dated May 3, 2006. I appreciate and accept yout offer to 

schedule a meeting regarding Continental .Airlines' concerns about the flight fee 

calculation at Newark Liberty International Aitpott ("EWR"). I will call you to discuss 

avaihble dates. 

I note though that it is unclear from your letter whether the Port Authority is prepared to 

provide any further information or detail regarding the flight fee calculation. You state 

that you "remain willing to ... review the information [Continental] have received" and 

that the meeting could be of assistance "in understanding the information you have." In 

order to make the meeting meaningful, however, Continental really needs more detail than 

has been provided in the past by the Port Authority. 

In my prior correspondence, I have outlined the type of information we need- and which 

has not been provided, either by your office or through the Freedom of Information 

Aclroinistrator. With regard to the flight fee calculation, we would like to have the 

following (for the years 2000-2005): 

• For the Airport Services Charge Factor portion of the flight fee, please provide a 

description of each of the cost items represented by the Airport Setvices Charge 

Factor, with detail provided for each category of costs; and, for each such 

category, a detailed description of the costs and amounts included within such 

category (including for fixed charges, a description of the interest rate used to 

calculate such fixed charges). 

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Paul Hastings ATIOIINEYS 

Carlene V. Mcintyre, Esq. 

May 19,2006 

Page2 

• For d1e PAF Charge Factor portion of the flight activity fee, please provide a 

description of each of dle cost items represented by dle PAF Charge Factor, widl 

detail provided for each category of costs; and, for each such category, a detailed 

descdption of dle costs and amounts included widlin such category (including for 

fixed charges, a descdption of dle interest rate used to calculate such fixed 

charges). 

• For the Phase 1A Charge Factor pottion of dle flight activity fee, please provide a 

description of each of the cost itetns represented by dle Phase 1A Charge Factor, 

with detail provided for each category of costs; and, for each such category, a 

detailed description of dle costs and amounts included within such category 

(including for fixed charges, a descdption of the interest rate used to calculate such 

fixed charges). 

• What pcrccntllge of the total direct costs of providing the PAF is represented by 

the "major elements of costs" used to calculate the PAF charge factor? What 

percentage of the total indirect costs of providing the PAF is represented by the 

"major eletnents of costs" used to calculate the Airport Services Charge Factor 

that is allocated to dle PAF? What percentage of the total costs of providing 

Airport Setv:ices at EWR is represented by the "major elements of costs" used to 

calculate the Airport Services Charge Factor? What were these percentages for dle 

calendar year 1973? 

• What is the amount/ rate of the· fixed charges cover factor included in dle flight 

activity fee? How is the amount calculated? To what charges is the cover factor 

applied? How is the interest rate to calculate the fixed charges determined? 

• In calculatiog the flight activity fee, is a 0.6 (zero point six) fixed charge cover 

factor applied? If so, to what fixed charges is this cover factor applied? 

• In calculatiog the tentlltive flight activity fee for the calendar year 1973, was a 0.6 

(zero point six) fixed charge cover factor applied? If so, to what charges was this 

cover factor applied? 

The fottnula for the annual calculation of the flight activity fee is supposed to be based on 

actual costs incurred in the operation and maintenance of the airfield. The infonnation 

provided by the POit Audlority to Contioental annually contains only the highest-level 

summary of these costs. There is no detail concerning any of the individual cost items 

that make up the totals or the tnethod used to atnortize each such cost item. Thus, there 

is no way for Contioental to detenninc whether the flight activity fee in fact has been 

calcuhted accurately based on actual costs incurred in the operation and maintenance of 

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Paul Hastings ATIOlUI~ 

Carlene V. Mcintyre, Esq. 

May 19,2006 

Page3 

the airfield or represents an appropriate application of the fommla. The details requested 

above will help to enable Continental to make that determination. 

As you !mow, on behalf of Continental, I have also requested information relating to 

revenues and expenses for the airfield and for the airport as a whole. I believe that 

Continental is entitled to the infom>ation so as to be able to detennine whether the flight 

activity fee is fair and reasonable and otherwise in accordance with federal law. 

Tile Port Authority has given assurances to the federal government and the public that it 

will charge reasonable rates for the use of its aeronautical facilities. Federal law requites 

aeronautical rates to be reasonable. See, e.g., 49 U.S.C. § 40116. These requirements of 

federal law cannot be waived or abrogated by contract. ("[I] he requirements of any law, 

including the requirements for use of airport revenue, may not be waived, even by 

agreement with the aeronautical users." Federal Aviation Administration Policy Regarding 

Airpott Rates and Charges, 61 FR 31994, Section 1.3.) 

There are three simple facts that would give any neutral observer concern about the 

reasonableness of the rates and charges at EWR: 

• EWR's flight activity fee is the highest flight activity fee in the country and is 

approximately 60% higher than the flight activity fee at John F. Kennedy 

International Airport. 

• Each year, EWR generates a substantial revenue surplus. The 2005 budget 

forecast a surplus of$141 million. 

• The Port Authority uses the surplus revenue generated from EWR to subsidize 

other, non-aeronautical operations, such as the PATH train, and may be 

subsidizing other, non-aeronautical purposes currently unknown to Continental. 

Even if the Port Authority's grandfather exception were to allow such payments (which 

we do not concede), the generation of substantial surplus revenue still raises tl>e question 

of whether the aeronautical rates and charges are reasonable. The grandfather exception 

is limited and not a license to generate a surplus, not a basis to deny necessary infonnation 

to Continental. 

I understand that you disagree with Continental's position. But though we may disagree 

on the law, we should at least share a common interest in the facts. The Port Auth01ity 

has the facts, of course, but the Port Authority has elected not to share all of the facts 

with Continental, which is continuing its efforts to obtain them. To that end, and before 

having to involve the Federal Aviation Administration in this effort to obtain all of the 

facts to which Continental is entitled, I want to make one final effo11: at attempting to 

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Paul Hastings ...-rJQRN('J'S 

Carlene V. Mcintyre, Esq. 

May 19,2006 

Page4 

obtain the informacion necessary for Continental to evaluate the reasonableness of the 

aeronautical rates and charges at EWR. 

Accordingly, I request that at our meeting the Port Authority provide, ond be prepared to 

discuss, informacion which would answer the following questions: 

e Does EWR generate a net surplus of revenue over expenses on the airfield? If so, 

what is the ~mount of the sntplus, and what ru:e the revenue sources? 

• What percentoge of EWR's onnual revenue surplus is derived from the airfield, 

and what percentage from each of the other groundsidc operations? 

By molting this request, I om not suggesting Continental docs not continue to seek the 

other infottnacion first requested in my letter dated October 11, 2005. Instead, I do so in 

the hope that the Port Authority will reconsider its refusal to provide info1matiou to 

which Continental is entitled. 

Given that the Port Authority, for more than seven mouths, has refused to provide this, 

or any, informacion tl1at would enable Continental meaningfully to evaluate whether the 

rates and charges at EWR ate reasonable and in accord with federal law, please consider 

this letter a final attempt at informal resolution of this issue, as contemplated by 14 CFR 

Part 16.21. 

Sincerely, 

g~~ RobertS. Span 

of PAUL, HASTINGS,JANOFSKY & WAUffiR LLP 

RSS:mc 

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